Spitzer Probe Includes Reinsurance Tactics

New York Atty. Gen. Eliot Spitzer’s probe into insurance industry corruption includes an investigation into brokers’ strong-arming insurers into giving them reinsurance business, a source close to the situation said Monday.

Reinsurance is the sharing of risk by secondary insurance companies, which collect a share of the premiums. Spitzer’s investigators are looking at allegations that brokers routinely demand the right to place reinsurance for insurers it hands premiums to, a practice known as “tying.”

Since launching its insurance industry probe in April, Spitzer’s office has received several hundred boxes of printed e-mails from brokers and insurers, the source familiar with the investigation said. “They’ve got a truckload of documents -- and some of it is related to tying,” the source said.

The practice has always been a driving force in the business, said Andrew Barile, a reinsurance consultant.

Spitzer last week charged broker Marsh & McLennan Cos. with conspiring with insurers to rig high bids. Insurance companies including American International Group and Ace Ltd. were named, but not charged, in the complaint.

Marsh could not be reached for comment. In a separate development, Ace joined AIG in saying it would no longer pay insurance brokers fees for steering business to clients.